Your Checklist for Buying a House

You’re about to start a pretty significant journey: becoming a homeowner. It’s good to have a home-buying checklist handy so the process is as smooth and stress-free as possible.

Let’s go through the essential checklist for buying a home, from getting your finances in order, to finding the perfect property.

Assess your finances

Yes, you may qualify for a zero percent or low- down payment when you close, but that’s not often the case. And even if you do qualify, think about your monthly mortgage costs. No matter how you look at it, you’ll want to be financially prepared for this years-long commitment. That means:

Consistent income

When you apply for a mortgage loan, lenders like to see that you have a steady stream of money coming in. That tells them you are capable of paying your monthly mortgage payments.

Healthy savings

If you have this, it means you not only have cash on hand for closing costs and an emergency fund, but that you also put money toward a down payment and thus lower your monthly mortgage payments — and have instant equity in your home. And there are lots of ways you can save up for a down payment, like moving a set amount into your savings every time you get paid.

A good credit score

You can buy a house with a wide range of credit scores, but the higher your score, the better odds that you’ll secure more favorable loan terms, like a lower interest rate.

A healthy debt-to-income (DTI) ratio

Your DTI is an important figure to lenders because it lets them know that you can pay your mortgage and your other recurring debts with no issue. Ideally, your DTI will be below 36%. A low number will show lenders that you’re not too financially stretched to afford a mortgage.

Check if you qualify for down payment assistance

If this is your first time buying a house, you might be able to take advantage of first-time buyer assistance in the form of local government grants or deferred payment loans.

Set your budget

You won’t just be paying your monthly mortgage. You’ll also have to pay property taxes, homeowners insurance, and HOA fees if your neighborhood has one. So you’ll want to figure out how much you can realistically afford without spreading your finances too thin. After all, you probably don’t want to buy a home then end up unable to buy new furniture or handle an unexpected repair.

Check your BuyAbility

BuyAbility^SM is a tool from Zillow that helps you calculate your home-buying budget. It helps connect your financial standing within the current mortgage marketplace to show you how different interest rates and your credit score could impact your monthly mortgage payments. Then it uses that information to see how much house you can afford. And you can keep coming back to check your updated numbers as they change with federal interest rates.

Go through your monthly spending 

After you pay your bills, how much are you left with? You can create a picture of what you can afford based on how much you make every month after taxes, then subtract your recurring bills and expenses, reflect on the things you need to spend on versus the things you spend on for fun, and figure out how much you can afford to save after that. Then ask yourself: is this amount enough to safely afford a mortgage? 

Don’t forget you’ll also want to have enough leftover money so you can keep adding to your savings in case of an emergency. 

Gather your application documents

It’s a good idea to get your important documents together now, so you’re not scrambling to get them once you need to formally apply for a mortgage. Plus, you may need some of them to get approved for a loan. Here are some of the things you’ll want to find, along with a couple examples of each:

• Your ID: driver’s license; passport; or your Individual Taxpayer Identification Number (ITIN).
• Proof of recent employment and current income: W-2; recent pay stubs; or bank statements.
• Proof of assets: bank statements to show you have enough money to pay closing costs and your mortgage.
• Debt statements: statements from the past two months for any recurring payments, such as car loans and credit cards.
• Bankruptcy discharge papers: Filing for bankruptcy will fall off your credit report after some time. But either way, your lender will want to verify the reason and financial impact of your bankruptcy so they can figure out your likelihood of repaying your loan on time.

Shop around for a lender

A third of buyers looking for a mortgage shopped around for a lender, most of them citing a desire for better interest rates. That’s according to Zillow’s latest Consumer Housing Trends Report. You never know how great of an interest rate you can get if you don’t ask around. Even a one-percent difference in your interest rate can end up costing you thousands more dollars over the term of your mortgage.

Get pre-qualified

Getting pre-qualified means you self-reported your income, debts, and credit to any potential lenders. That’s how they figure out how much you can borrow. Yes, you can get pre-qualified with multiple lenders.

Did you know at Zillow Home Loans, we can pre-qualify you in as little as 5 minutes, with no impact to your credit score?*

Get pre-approved

Pre-approval involves sending over your financial documents to your lender. They then agree to loan you the amount they see fit based on your financials, as long as you continue to meet their conditions through closing day. Once you know how much your mortgage loan will be, you can start narrowing down your home buying options.

You can get pre-approved with multiple lenders. Most shoppers (45%) get pre-approved by a single lender, but another 32% get pre-approved by more than one. And the reasons can vary, from finding another lender with a better interest rate after your first lender has pre-approved you; to wanting a diverse mix of lenders, i.e. small banks, large banks, and so on.

Find an agent

You can find an agent before or after you find a lender — or even at the same time. 

A good buyer’s agent can have a huge impact on how you feel throughout the home-buying process, and what homes you see. You can directly connect to a buyer’s agent in your area on Zillow or conduct a tailored search for agents by neighborhood, name or specialty. You can see their reviews from other buyers and what type of homes they’ve helped people purchase. You can meet with various agents and see who you have the best connection with. When you do choose your agent, you’ll sign an agreement to tour homes and to make them your official agent. Learn more about what to look for in an agent before you commit.

Hire a lawyer

If this applies to you, it’s best to find a lawyer at this stage so you don’t have delays down the line. In some states, you’re legally required to hire a lawyer to represent you during your home-buying transaction. They take care of reading all the documents involved with buying your home and signing onto a mortgage. Your agent can probably recommend a good lawyer they’ve worked with before. But this is not a requirement in every state. Ask your agent for their advice.

Start shopping

Tell your agent about your budget, any non-negotiables you may have, and how soon you’re trying to close (the whole process from shopping to closing can take upwards of four months). Then they can work their magic and whip up some listings for you to look through. What’s more, you can share your favorites list from the Zillow app with them.

Set up alerts

The Zillow app lets you set up notifications so you know when homes are listed that fit your preferred features, like number of rooms, a bath tub, a garage, and plenty of other things.

Make time to tour — in person, or virtually

Your agent will serve as a middleman to help you schedule tours of the homes you’re really interested in. Depending on how soon you want to move, you should either make yourself flexible during the week, or clear out your weekends so you can tour all the homes you like.

If you’re shopping in a market far from where you currently live, you can also take virtual tours. When a home is listed on Zillow, sellers can include 3D and virtual reality tours to help you get a better feel for the home wherever you are.

Refine your wants and needs

You may not be able to get everything you want, so prioritize the home features that are most important to you. As you start to shop around, or even when your lender tells you how much you can borrow, you may start to realize that what you thought you wanted in your next home isn’t actually that important, or that you can’t afford it. Or maybe you learn you can actually afford more than you thought. You should also give your agent feedback about the homes they send your way, so they can get a better idea of what to look for. Here are some tips to narrow your search while you’re browsing on the Zillow app.

Make an offer

Depending on your market (and honestly, your luck) you could end up making one offer and have it accepted, or a dozen and have them rejected. Your agent will be your best guide on what makes for a competitive offer on a given home, and when you can negotiate.

Have a set amount of earnest money

Including earnest money in your offer shows that you are serious about buying. The more money you include could sway your seller in your favor. Talk to your lender and agent to figure out how much you should — and how much you can afford — to include in earnest. This money ultimately goes toward your closing costs.

Establish contingencies

Eighty-five percent of buyers included at least one contingency in their offer. The most common one is an inspection contingency that allows you to rescind your offer if a home inspector finds issues with the home that you don’t like. The second-most common is a financing contingency that lets you pull out if your financing falls through. Your agent will tell you what contingencies you should include in your offer. If one of your contingencies is triggered, you can pull out and get your earnest money back.

Negotiate

If a seller is interested in your offer, they may accept it outright and you can move forward. But they may also want to negotiate. This is where you and your agent can bounce strategies off each other and agree on what you can ask for versus when you should give the buyer what they want.

Apply for a mortgage loan

Having your offer accepted means you’re in escrow. This period can last upwards of a month, and it’s when you need to get several things done.

Chief among them: lock down your financing. This is when you formally apply for your mortgage with your lender (remember, getting pre-approved is not the same as applying for a mortgage). 

Get ready to go back and forth with your lender, as they’ll have questions and request documents from you while they process your application. All those documents you wrangled up earlier will come into play here. It’s normal for your loan approval to take a few weeks. Sometimes loans aren’t approved until close to closing.

Get home insurance

You’ll need to bring proof of home insurance to closing, so use this time to find a provider. You can shop around, or bundle your home insurance with the company you use for your auto insurance. The first year’s worth of home insurance is often paid upfront, so be sure to add that into your closing costs.

Choose a title company

A title company will make sure the title to the home you’re buying is legitimate and then issue title insurance for the home. If there are disputes or claims from someone else that the home is actually theirs, you and your lender will be protected from lawsuits through that title insurance. Your agent can recommend title companies, or you can ask homeowners that you know. 

Title insurance is expensive, so shop around for the best rates you can get. If you buy an owner's title insurance policy, make sure you get one with as few exclusions as possible and that it covers the full purchase price of the home.

Complete your inspections and appraisal

After your offer is accepted, your lender will request an appraisal and you’ll be able to schedule a home inspection. This is when both you and the seller have their fingers crossed, because if the inspector finds a significant issue, you could rescind your offer. And if the home is valued too high, you’ll have to make up the difference between what your bank has agreed to lend you and what the home is worth.

Home inspection

If you’re buying a home with a mortgage, some lenders may require a home inspection. But more often than not, you can choose to schedule a home inspection or forgo the inspection process entirely. A home inspection will reveal if the home has any structural problems or flaws, which is why it’s recommended to get one done if you’re able. The most common type is a standard surface inspection, which checks for noticeable signs of damage on the interior and exterior of the home. You can request a specialized home inspection to dig deeper into problems areas, such as pests, termites, radon and sewage lines.

Some buyers choose to forgo any inspections, usually to curry favor with their seller. But ask your agent if that’s the right move.

Home appraisal

Your lender will request a home appraisal after your offer is accepted to make sure the home is actually worth the list price. A licensed appraiser will schedule a time to visit the property and do a walkthrough or drive-by to assess the property and compare their findings against comparable homes and public record data. If the appraised value comes in over your agreed purchase price, you’re getting a great deal. If the appraised value comes in under, you and your agent may have to go back to the drawing board and find another home to buy, depending on if the seller is willing to negotiate purchase price or what your lender is willing to accept.

Close on your new home

If all of your previous checklist items turn out well, it’s time to close on your new home. If using a lawyer, they will usually be present at closing, as well as a representative with the title company, and possibly your agent. 

What you’ll sign

You’re going to sign a wide variety of paperwork, including a promissory note where you agree to pay your mortgage, and a warranty deed or warranty title, transferring ownership of the home’s title from the seller to you. 

What to bring

There are generally three things you should bring to closing: your ID; proof of home insurance; and cash-to-close to pay your closing costs. 

Remember to lean on your agent — and on your gut — throughout this process. If you have questions, ask them. You don’t want to commit to this big decision with any lingering concerns. Yes, you may feel nervous, but you should also feel excited, because becoming a homeowner is on your horizon.

*Zillow Home Loans, NMLS # 10287. Equal Housing Lender